A group of satellites is winning a legal battle to seize Air India’s money laundering campaign

A group of satellites is winning a legal battle to seize Air India's money laundering campaign

The company was awarded about $1.3bn in international arbitration rulings, but India has refused to pay, alleging that the original competition for the broadband contract was mired in fraud.

In a Montreal court ruling on Saturday, a judge ruled that Devas shareholders were entitled to half of the money that the Canada-based International Air Transport Association holds on behalf of Air India. The Iata operates a settlement system for travel agents, meaning that its offices worldwide can handle much of an airline’s global revenues.

Devas shareholders hired Jay Newman, who led Elliott Management’s battle with the Argentine government, to lead its legal effort © Patrick Dodson/FT

Devas shareholders argue that they can claim the assets of Air India, which is owned by the government but is in the process of being sold to Indian conglomerate, the Tata Group.

Story Highlights

  • Devas Multimedia, which has been embroiled in a fight with the government since a contract it had to develop broadband wireless in the country was cancelled a decade ago, has been targeting Indian state assets for potential seizure.

  • Devas shareholders, who include US investment groups Columbia Capital and Telecom Ventures as well as Deutsche Telekom, hired Jay Newman, who led hedge fund Elliott Management’s 15-year battle to force the Argentine government to pay out $2.4bn on its defaulted debt, to lead its legal effort.

They filed an application last month to seize the entirety of Air India’s funds held at the Iata, because of the imminent sale to Tata.

Air India argued at last month’s hearing that funds going through the Iata represented about 65-70 per cent of its revenues, and that the “continued operation of the airline is therefore put in jeopardy”. The Iata, meanwhile, told the hearing that the seizures had had a “chilling effect” on its other clients.

Tata Sons, which has not completed the purchase of Air India, declined to comment. Air India declined to comment. The Iata confirmed that “as part of a commercial dispute between various parties in India, Iata had been served a third-party garnishment order on funds that Iata may be holding for and on behalf of specific Indian entities.” It declined to comment further.

Meanwhile, Devas shareholders have also in effect seized a property in Paris’s upmarket 16th arrondissement after obtaining an asset freeze order from a Paris court allowing it to register a mortgage on the property. The building has previously served as the residence of the deputy chief of mission at the Indian embassy. The property, which is valued at €3.8m, according to filings, is the same one that Edinburgh-based Cairn Energy froze last year as part of its attempts to force New Delhi to pay $1.7bn awarded by an international tribunal. The latest freezing of the apartment block has not previously been reported.

“India has assets like this all over the world,” Newman told the Financial Times. “This is just the beginning. We’re planning many more seizures.” The seizures highlight the lengths to which some companies are prepared to go to recoup money owed by sovereign states. In August last year India offered to refund $1bn to Cairn. Cairn, now called Capricorn Energy, subsequently announced this January that it was withdrawing “all global enforcement proceedings” against the Indian government.

However, in his ruling in Montreal on Saturday the judge said the measures taken by India had gone “way beyond a legitimate contestation of the validity” of the arbitration awards. “We’ve seen this show before,” said Newman, referring to countries’ attempts to pursue creditors in domestic courts. “It never affected our ability to pursue assets and cash flows outside the country.”

As its battle with Devas has escalated, India has launched legal proceedings within the country to shut the company down. In November India’s Supreme Court halted the collection of Devas’s award from the International Chamber of Commerce after the attorney-general said India had discovered “a serious fraud”. Devas shareholders have separately filed a lawsuit in the southern district of New York, which could if successful allow them to seize Air India’s planes.